Does Investing in Capital Expenditures Add Value to Property, or Just Increase Taxes?

By David Chitlik Vice President - Hospitality Tax, Altus Group | June 10, 2018

Co-authored by Renea Linton, Director - Hospitality Tax, Altus Group

Real estate tax is one of the top three expenditures for property owners, and it can be the most difficult to understand. Owners know that capital expenditures (Cap Ex) influence property valuation, which in turn can have a big impact on taxes. However, the perception of added value can also play a role in the tax assessment.

For example, some renovations don't increase the value of a property; they simply maintain it. Unfortunately tax assessors may perceive any renovation as increasing a property's value, which would then justify higher taxes. Ensuring  the assessor's perception of increase is a valid one, therefore, helps ensure that the tax is calculated fairly.

This is the first of two articles that explore the essential, complex relationship between Cap Ex, property value, and tax. 

A Primary Driver of Cap Ex: Brand Standards

How much should an owner spend to maintain or upgrade a property? A large part of that decision depends on brand standards, franchise offerings, and management and franchise agreements-as well as the normal wear and tear of a property.

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Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.